April 23, 2017

Australian Inflation lower than expected

26 January 2017, 12:41 | Ignacio Smith

New Zealand Dollar Outlook: Strength Ahead as Expectations for RBNZ Interest Rate Rise Grow

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The annual inflation rate hasn't been within the RBA's target band since the September quarter of 2014, reported APP (Australian Associated Press).

A rise in petrol prices has sent inflation to the highest level in more than two years.

The March quarter usually sees a perking up of inflation because of all the increases in government charges and fees at the start of the year.

"We continue to expect the RBA to keep rates unchanged at 1.5 per cent throughout 2017". There is just no dangers to the economy from inflation.

The Reserve Bank of Australia already has interest rates at 1.5 percent, creating a conundrum as to what course of action the central bankers can take to spark inflation growth.

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"A February rate cut looks unlikely at this stage - the labour market is holding up and the RBA may want to monitor the recent uptick in investor loan growth because of the risk to financial stability".

Beacher attaches the likelihood of such an outcome at around a 60%, with her forecast for core inflation, also referred to as underlying inflation, above the median economist forecast for a quarterly increase of 0.5% leaving the year-on-year rate at 1.5%.

The December inflation quarter data will be released on Wednesday by the Australian Bureau of Statistics.

Rising costs for tobacco (7.4 per cent), automotive fuel (6.7), vegetables (2.5) and restaurant meals (1.1) were some of the biggest contributors to rising prices, but weren't enough to push the result closer to the Reserve Bank's target. These rises are partially offset by falls in furnishings, household equipment and services (-0.8 per cent) and communication (-0.8 per cent).

Dragging the index down was a 2.6 per cent fall in the prices of worldwide holiday travel and accommodation in the quarter, a 5.1 per cent fall in the price of clothing accessories and a 3.2 per cent fall in the price of non-alcoholic beverages.

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